Auditor finds no manipulation of electricity market

The independent market monitor for the Public Utility Commission, Dan Jones, said Monday that there was no market manipulation of wholesale electricity prices on June 25 and 26 when power usage and prices soared and demand for electricity set records for the Texas grid.

Jones said the operator of the Texas grid, the Electric Reliability Council of Texas, properly followed its procedures.

Jones, an economist, responded in writing to what he said were “informal” inquiries as to whether there were price abuses during the two-day period, and to allegations from a blogger that there appeared to be manipulation of prices during those two days. Some members of the state Senate Business and Commerce committee also raised the question of possible manipulation at a July 10 hearing.

During extremely hot and dry weather on June 25 and 26, peak electricity soared to record levels and “market prices averaged higher than normal in Electricity Reliability Council of Texas (ERCOT) markets,” Jones wrote in the report.

Prices averaged about $42 per megawatt hour for the day on June 25, about $15 per megawatt hour higher than average prices.

On June 26, when electricity demand surpassed that of June 25, prices averaged about $270 per megawatt hour for that day, and reached the wholesale cap of $3,000 per megawatt hour for 25 minutes from 2:40 to 3:05 p.m., Jones wrote.

As the independent market monitor, Jones’ main role is to prevent market manipulation and evaluate the operations of the wholesale market.

An anonymous blogger at www.TexasElectricityRatings.com, questioned the timing of the $3,000 spot price, saying it occurred “just before the PUC voted to raise the price cap” as a means of spurring construction of power plants. The blogger apparently was implying that that made it easier to boost the wholesale cap to $4,500, as the Public Utility Commission did on June 28.

The blogger also questioned why grid operator ERCOT didn’t make its deadline in posting its Day Ahead Market that matches buyers and sellers of electricity.

While voluntary, the day-ahead market creates a financial obligation for buyers and sellers of electricity and offers a hedge against the real-time spot market, said John Dumas, ERCOT’s director of wholesale market operations.

ERCOT’s deadline to post results of the Day Ahead Market is 1:30 p.m. ERCOT can break the deadline, Jones wrote, but it must notify buyers and seller of power about the delay, which it did. The market report, which is generated using complex mathematical formulas, was delayed until 5:42 on June 26.

Such delays aren’t uncommon, Jones added.

Jones also said that June 26th price spike to $3,000 per megawatt hour wasn’t unusual, as “market prices will generally rise to the system-wide offer cap to reflect the degradation in reliability” as electricity reserves are consumed to meet demand.

The blogger questioned why about 600 megawatts of power rather suddenly became available at around 5 p.m. on June 26, power that could’ve been used to prevent a price spike.

That boost in available electricity, Jones said, occurred because some units that had “operational issues” earlier in the day were restored or able to boost their capacity.

“There is no indication that the outages were related to manipulative conduct,” Jones concluded.

vvaughan@express-news.net